Public retailers reap first-quarter F&I gains
The full-court press to sell more extended service contracts and other F&I products is working for the six publicly traded new-car dealership groups, with each posting first-quarter gains in F&I revenue per vehicle retailed.
The six public retailers held first-quarter earnings conference calls for investors this month, with Group 1 Automotive Inc., Lithia Motors Inc. and Penske Automotive Group Inc. discussing their results late last week.
Group 1 posted F&I revenue per vehicle of $1,458, an all-time company record and up 9 percent compared with the first quarter of 2013. During the conference call, CFO John Rickel cited higher F&I product penetration rates and income per contract as contributing factors, although he didn’t provide details.
The other public new-car dealership groups are AutoNation Inc., Sonic Automotive Inc. and Asbury Automotive Group Inc.
Lithia said in its earnings call that F&I revenue per vehicle was $1,200 on average, an increase of about 8 percent from the first quarter last year.
CEO Bryan DeBoer said Lithia arranged financing for 72 percent of its customers in the quarter, up from 70 percent in the first quarter of 2013. Service contract penetration rose to 44 percent from 41 percent, and penetration for lifetime oil and filter contracts was 38 percent, up from 35 percent in the first quarter of 2013.
CFO Chris Holzshu said Lithia’s average F&I revenue per vehicle is about $1,400 for new vehicles, around $1,000 for used vehicles and somewhat less for high-mileage “value” vehicles, which Lithia has been making a greater effort to sell. “We know there’s opportunity there, and we’ll continue to work on it going forward,” he said during the conference call.
Penske Automotive Group CEO Roger Penske said that a greater focus on F&I helped his group increase F&I revenue per vehicle about 8 percent in the first quarter, to $1,097.
That was the lowest among the six groups. During the company’s conference call, Penske repeated previous remarks that his group’s high lease volume puts it at a disadvantage for selling service contracts because lease customers typically don’t keep their cars beyond the original warranty.
In the first quarter, 72 percent of the Penske dealership group’s unit sales came from what it calls its “premium/luxury” brands, which typically have leasing rates above the industry average. Only 4 percent of sales came from Detroit 3 brands, which typically have lower leasing rates.
In addition, although Penske didn’t mention it by name, guaranteed asset protection comes automatically with most leases so many customers have no reason to buy a GAP policy. GAP pays the difference between what a customer owes on his or her car and the insurance settlement if the car is totaled or stolen.
“When you think about someone who’s leasing a car for 30 months, it’s hard to sell an extended service contract or some of the things that you might sell on a 48- or 60-month [loan] contract. So we think we have some downward pressure there,” Penske said.
Earlier, AutoNation, Asbury and Sonic also reported higher F&I revenues per vehicle in the first quarter.
AutoNation posted $1,407, an all-time company record and an increase of 6 percent from the year-earlier period. Sonic’s F&I revenue per vehicle rose 5 percent in the first quarter to $1,206. Asbury averaged $1,308 per vehicle, up 1 percent from the 2013 period.
AutoNation ranks No. 1 on the Automotive News list of the top 125 dealership groups in the United States, with retail sales of 292,922 new vehicles in 2013. Penske ranks No. 2, at 199,795; Group 1 ranks No. 3, at 155,866; Sonic ranks No. 4, at 132,363; Asbury, ranks No. 7, at 86,685; and Lithia ranks No. 8, at 67,177.
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